New Columbia Solar CEO Testifies on Behalf of DC Clean Energy Act

New Columbia Solar CEO Testifies on Behalf of DC Clean Energy Act

The CEO of New Columbia Solar, Mike Healy, was among those who testified at a public hearing before the DC City Council, Tuesday, October 9 on behalf of the D.C. Clean Energy Omnibus Bill of 2018. New Columbia Solar is a local energy provider of solar electricity to residents and businesses throughout the District. You can find more information about the company at www.newcolumbiasolar.com.

The bill, introduced by Ward 3 Councilwoman Mary Cheh is aimed at making District a 100 percent clean energy city by 2032.

Follows is a copy of Mike Healy’s written testimony.

October 9, 2018

Councilmember Mary Cheh

Committee on Transportation and Environment Council of the District of Columbia

Thank you, Council Member Cheh & members of the committee, for providing me some time to share with you my experience building and financing solar projects in the District over the last ten years and what steps I believe we can take to ensure another ten years of successful solar deployment across the District of Columbia. My name is Mike Healy, and I am the Co-Founder and CEO of New Columbia Solar and a resident of our great city. We are a local solar company based here in the District who builds, operates, finances and maintains solar energy systems in Washington D.C. We are 44 local employees strong, and we live here, we work here, our kids go to school here, and we are very proud of the work we are doing in our community. Our mission is to make it as easy as humanly possible for DC residents and businesses to benefit from solar energy; we are innovating how communities across the District are powered, and we want to inspire every city in the world to follow in our footsteps.

New Columbia Solar appreciates and applauds CM Cheh’s continued commitment to making clean energy more accessible for District of Columbia residents. We are supportive of the Clean Energy Omnibus Bill of 2018 (B22-0904) and ask the Committee on Transportation and the Environment to adopt the Maryland, DC, Virginia Solar Energy Industries Association’s proposed amendments to the legislation. We believe these amendments are absolutely critical for the continued success of the local solar community, especially to the now over 1,530 District residents that are employed in the solar energy sector, as well as the ultimate success of the Solar for All low-income program, a first of its kind initiative that you championed through the Renewable Portfolio Standard Expansion Act of 2016. Overall, we are cautiously optimistic that the Clean Energy Omnibus Bill of 2018 will lead to greater access to locally based solar energy and a foundation for the long-term success of the Solar for All program.

Fifteen Years of Progress

It’s important to note that the success our city is now realizing has come as a result of consistent, and comprehensive, policy support over a fifteen-year time frame. Chairman Mendelson deserves significant credit for his vision in leading the efforts to enact the original Renewable Portfolio Standard in 2004 and 2005. Subsequently you, CM Cheh, lead the first major revision of the Renewable Portfolio Standard through the Distributed Generation Amendment Act of 2011, which served as the catalyst for much of the solar and clean energy initiatives we’re witnessing across our city – hundreds over people across our city now have jobs because of your leadership. In fact, in looking back at my testimony from 2011, I am proud to say that we have achieved most of the commitments the solar industry represented, such as creating over 1,200 local jobs by 2020 and generating over $200MM of private sector investment into the city. In 2017 the District achieved a milestone of having over 1,530 solar energy employees, and solar is directly responsible for attracting a combined total of $100MM of private sector investment in 2016 and 2017 and is on track to deploying nearly $80MM of private sector capital in 2018 alone.

I am extremely proud that we have achieved the commitments we set out to achieve and, more importantly, this serves as a real-world demonstration that the policy mechanisms in place are working. We have been able to achieve all this without increasing retail electricity pricing to consumers. According to the United States Department of Labor, Bureau of Labor

Statistics average retail electricity price in the District was $.128 in 2010 and $.128 in 20171– that is before you take inflation into account. Additionally, the District’s retail electricity price has consistently remained below the national average price with a 7% lower average price in 2017. In summary, we are cleaning our grid and reducing our city’s exposure to future increased costs of fossil fuels.

Moreover, in 2017 the Office of People’s Counsel published an exciting study2 in which they determined that every kilowatt-hour of solar energy generated in the District of Columbia produces $347.933 (2018$) in societal and grid benefits to District ratepayers. That equates to a 2017 savings of $29.9MM (2018$) to ratepayers attributed to solar energy based on the 67MWs of interconnected solar reported by the Public Service Commission on May 1, 20184. Furthermore, it means the current solar RPS requirements will deliver nearly $3.5B in societal and grid benefits between now and 2050. District ratepayers will realize over $13.1B in societal and grid benefits if the Council adopts the OPC’s technical recommendations of 20% of electricity load served by solar energy, or $10.3B if the Council choose to adopt Chairman Mendelson’s recommended schedule in One Hundred Percent Renewable Portfolio Expansion Act of 2018.

Through a lot of blood, sweat, and tears, companies like New Columbia Solar have been able to deliver on the promises made and residents and businesses all across the District of Columbia have become the beneficiaries. It wasn’t until the passage of the Renewable Portfolio Expansion Amendment Act of 2016 that District’s solar market really kicked into high gear, and the primary reason for this because the District demonstrated a long-term commitment to solar energy through a 16-year RPS commitment. Because solar systems are financed through long-term power contracts lasting fifteen to twenty years with debt terms ranging nearly as long, solar requires long-term mechanisms such as the RPS. This is why chief among our requests (as well as MDV-SEIA’s) is a solar carve-out schedule that runs through 2050. Long-term commitments almost above all else are of the utmost importance to the success of companies like New Columbia Solar and our ability to continue to hire District residents.

Benefits of Long-Term Policy Commitments

The Renewable Portfolio Standard (RPS) provides the long-term policy commitment that is vital to the success of District-based solar, companies like New Columbia Solar to continue to hire and grow, and if we are to achieve the Solar for All goals. Almost above all else, stability is fundamental to the solar market. Solar energy systems are long-term infrastructure investments that require a significant capital investment upfront akin to purchasing all your power at one time for the next 20 to 30 years; the systems themselves often have 30+ year life cycles. Additionally, these systems are typically financed through 15 to 20-year energy sale agreements, known as power purchase agreements (PPA).

2 Office of People’s Counsel Value of Solar Study; Distributed Solar in the District of Columbia. April 12, 2017.

3 $327.06 is represented in 2015 dollars. This equates to $347.93 in 2018 dollars.

4 Public Service Commission of the District of Columbia. “Report on the Renewable Energy Portfolio Standard for Compliance Year 2017,” page 24. https://dcpsc.org/PSCDC/media/PDFFiles/NaturalGas/Report-on-REPS-for-2018-043018-final.pdf

A prime example of the benefits of a long-term policy commitment is within six months of the passage of the Renewable Portfolio Standard Expansion Act of 2016, New Columbia Solar grew from three employees to nine by the end of 2016 and has subsequently grown to 44 employees. Long-term policy visibility also enables us to provide lower energy rates for our customers, including low to moderate income families, and also allows us to provide more innovative solutions for customers’ such as financing roofs that need replacing. With that in mind, I strongly encourage the Committee to adopt a solar RPS schedule through 2050 accompanied by an appropriate alternative compliance schedule that will support the continued development of district-based solar energy. The current language in the legislation utilizes a formula that we believe will make it harder to reduce electricity bills through solar power for District residents because the uncertainty in the formula will make it more costly to finance solar projects. Additionally, the uncertainty in the formula will make it difficult for solar companies to plan and therefore hire. Additionally, it will make it difficult for electricity suppliers to determine what their solar energy obligations are for the RPS. Transparency between solar companies and electricity suppliers is key in order for the REC markets to function properly. Therefore, NCS recommends using a tiered schedule-based approach similar to what has proven success in the District thus far (if it ain’t broke don’t fix it).

Actions Needed Prior to 2019

Some unusual solar market conditions have emerged that threaten to reverse the success of the District’s solar policy. The District’s RPS solar carve-out has been incredibly effective at increasing the amount of solar capacity within the District. Since 2011, annual installations in the District have increased more than eightfold, accounting for hundreds of millions of dollars in local investment. Approximately 15 megawatts (“MW”) of annual solar capacity was installed in the last two years alone, and we anticipate well over 20MW will be installed this year. These robust installation levels have enabled the District’s local workforce to swell quickly, which can be attributed almost entirely to the strength of the RPS.

While the proposed Act establishes precedent-setting goals, allowing the District to meet its’ obligations to curb the effects of climate change while continuing to ensure solar energy is accessible to all District residents, less audacious near-term action is required to continue to sustain the District’s solar build rates. New Columbia Solar has become increasingly concerned with unstable solar renewable energy certificate (“SREC”) market conditions that have emerged since the enactment of the District’s improved solar carve-out in 2016.

The insertion of electricity exemptions as part of the Renewable Portfolio Standard Expansion Act of 2016 (D.C. Act B21- 0650) have effectively weakened the District’s stated solar targets and have created a market oversupply and liquidity crisis that has damaged the District’s otherwise investment-grade solar market. These market conditions threaten the local industry, employment base, and investor confidence that has been built up in the District over the past eight years. Furthermore, the uncertainty and lack of transparency in the market is making it increasingly difficult for us to continue to hire even though our current backlog of solar projects suggests we should do so. The market is too unstable right now to reasonably project market conditions as little as 60 days out. In essence, the grandfathering provisions have dwarfed the effective build requirements such that the 2018 – 2021 goals are much smaller than they actually appear; the 2022 goals currently mimic the 2019 goals, which is why we suggest making the 2022 RPS solar carve-out goals the 2019 goals.

As depicted on the graph above, the 30% decline in SREC prices since the beginning of this year is a result of unstable market conditions and the effective SREC oversupply. New Columbia Solar has studied the current situation in the SREC thoroughly and is happy to provide additional materials to the committee as to further explain why we are experiencing the situation at hand and what can be done to avoid a downturn. However, if left unchanged this oversupply could have a devastating impact on companies like New Columbia Solar and our employees and the families who rely on us for income. Similar “boom-bust” cycles have occurred in Maryland and Pennsylvania, resulting in significant downturns in their solar economies and many solar jobs being lost. The graphs below derive from our analysis of how local solar companies could be impacted if appropriate measures are not taken quickly to fix this problem.

The good news is unlike Pennsylvania and Maryland, the District’s oversupply issue has much more to do with a lack of transparency in the market then a fundamental breakdown in the market structure. Increasing transparency, extending SREC lifecycles, and accelerating the current solar carve-out in the RPS to 2022 should solve the problem.

In summary, New Columbia Solar applauds Chairwoman Cheh and the Committee on Transportation and the Environment, and we encourage the Committee to consider MDV-SEIA recommended amendments, including the following:

1. Accelerate the entire solar carve-out schedule by three years from 2032 to 2029 to restore market liquidity and the investment signal damaged by current and prospective RPS electricity exemptions.

Establish a solar carve-out schedule from 2030 to 2050 to achieve solar penetration in the District that is in line with the Office of the People’s Counsel Value of Solar

Increase SREC bankability from 3 to 5

Increase transparency in the market by requiring the PSC audit which electricity contracts are applicable to the Renewable Portfolio Expansion Amendment Act of 2016 exemption provision and which contracts are not

Increase transparency by publishing Pepco’s Phase I and Phase II interconnection lists on a monthly basis

Thank you for this opportunity to provide input to the committee. New Columbia Solar looks forward to continuing to work with the committee, DOEE, and stakeholders across the District to make solar energy more accessible to District residents and businesses and to continue to transform how communities across the District are powered.